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2016/12/28

Free the Debt Slaves

TaxProf Blog shares a proposal by Sheila C. Bair to help relieve the unrepayable, and often unserviceable, student loan debt incurred by American college graduates.

Student debt now stands at $1.3 trillion. More than half of student borrowers are unable to repay their loans according to the original terms. In a well-intended but poorly executed effort to make college broadly accessible, the government has lent freely to students, with little attention to whether they can repay those loans. The result is millions of young people with debt they cannot afford. ...

The "well-intended" part is debatable. And when you consider the larger result: millions of young adults who left college dumber than when they started, indoctrinated into left-wing ideology, and financially dependent upon their government creditors, the case could be made that the effort went exactly according to plan.

But casting blame is beside the point right now. At least Bair is suggesting solutions.

Mr. Trump should scrap debt financing of higher education and make the transition to true income share arrangements. Borrowers would fulfill their obligations to taxpayers by paying a fixed percentage of their income over an extended period of years. Think of this change as a shift in the government’s role from creditor to equity investor. When you lend to a business, it is obligated to pay you back with interest, but with a stock investment, your returns derive from the success of the company.

Similarly, with a student loan, there is a fixed obligation to repay the loan amount with interest, but with income share, there is only a contractual obligation for the student to return to taxpayers a certain percentage of his or her future income. Higher earners will pay back more than lower earners (up to a limit), though all will have an affordable payment and all will have protection against life events — a health crisis, caring for an elderly parent — that reduce their income.

Replacing the current, unwieldy programs with a single repayment plan based on income would provide immediate relief for millions of young people while guaranteeing a steady source of revenue to taxpayer coffers, particularly if payments were built into the tax withholding system. It would also provide economic stimulus, as lower payments on student debt would translate into higher consumer spending. ...

An additional measure to ease the student debt load would be tax law changes to require colleges to spend at least 5 percent of their endowments, as is required of other nonprofits. That’s what we do at Washington College. The law should also require that schools use a certain amount of this endowment spending for scholarships. ...

A noble effort, but Bair's proposal suffers from the same discredited assumptions that gave us the education bubble in the first place. But since a viable alternative is what separates criticism from heckling, here's my counter-proposal:

Forgive all $1.3 trillion of outstanding student debt. If multibillion-dollar insurance car companies and banks get bailouts, so should students who've effectively been reduced to indentured servitude.

Shut down the Department of Education.

No more federal money to colleges and universities

Close any institutions of higher learning that can't meet their operating costs without federal funds.

These measures may sound harsh, but only if you buy into the same false premise that underlies Bair's plan, viz. that college is for everyone, and everyone can benefit from going to college. The glut of grads who can't read at the high school level, exercise critical thinking skills, or find jobs outside of Starbucks demolishes that canard.

I believe I fall into this category, having accumulated around $60k of student loans during my time. I'm still about $20k away from paying them off.

Respectfully I would reject that plan. College students used to be adults. They're now referred to and treated as "kids." This is reflective of our cultural decline and I wouldn't encourage it by demonstrating that we don't have to pay the debts we agreed to assume.

I think the auto bailout was a mistake, and I would say the same for this. It's all wealth redistribution, and I would neither want to renege on my promise (that's what a loan is) nor force others to subsidize my perhaps poor decision.

As someone who holds a useless humanities degree, I am firmly in the "college is a scam" category. With caveats.

If there is some in the audience who are college age, I am going to attempt to address the question: "Should I go to college?" This is going to be an assessment made from opinions based off of personal experience, and should be taken with a grain of salt. My fellow commentators are more than welcome to agree, and point out errors.

I would personally not recommend going into college unless you are planning on going into a STEM job (science, technology, engineering and math), Medicine, or a law degree. And even in those cases this might not be sound advice. It is essential you do some research before making your decision. Decide if you want a job in your state, or if you want to move. Find out demand, find employers, and what they are looking for. Again, just personal opinion, but DO NOT, enroll as undeclared. That will be an extremely expensive mistake. If you are having a hard making a decision now, you will most likely have a hard time making the decision years into it. Make up your mind while you can do so without a mountain of debt.

Why do suggest only STEM, Medicine, etc? Because the vast majority of degrees outside of those fields are pretty much useless. With many of them you will only find teaching jobs, and competition for those jobs are fierce.I cannot stress this enough. You will not find a job with Gender Studies, Liberal Arts, or Fashion Studies. Forget the saying "you just need a degree, it doesn't matter which. Employers just want to know you can finish." It is hopelessly out of date. Also ignore aspersions against joining a trade, perhaps a trade really is right for you. Again do your research.

Another aside for aspiring authors, with the question "should I get an English degree?" I would go with Larry Correia's answer. It's not really necessary. Those with English degrees seem subject to the same unpredictable formula of hard-work, luck and marketing that everyone else is subject to. In my creative writing classes the teachers did very, very little, instead relying on workshops with fellow students. You could get the same experience from joining a local writing group. Some colleges have science fiction classes taught by actual SF writers. Mine had one years ago, and cut them all before I enrolled. And even then, from what I can you can probably get the information elsewhere. Most SF writers will go into how to write on their blogs. Much of what Larry Correia taught in his college course was just recycled from his blogs. If you want to be an author, I would suggest saving up to get a kindle, and then downloading as many books as you can from project Gutenberg. Read. A great deal.

So for the "Should I go to college", the easy answer is "no, you shouldn't it's a waste of time and money." And like all easy answers it's insufficient, inadequate, full of exceptions, and completely subjective. Again, Research. I learned a ton in college. Unfortunately the thing I learned the most is how to be a good college student. Being able to guess the right answer based on how the multiple choice question is written, and sussing out the professor's biases so you can handcraft an essay aren't skills you can put on a resume.

Again these are just my opinions, and plenty of counter opinions can be found. I'm just an anonymous aspiring writer on the internet. Some successful writers say college is important, and other just as successful writers, if not more so, say it's not. Look at both when doing your research.

Brian, I apologize for the rant. (It was longer, but apparently I went over character limit. Now to put the same passion into my own writing.)

The debt forgiveness serves several purposes: (1) new graduates can't begin to start a family or afford appropriate living space with $50K+ of debt on their shoulders, (2) debt forgiveness goes a good ways to eviscerating universities and banks that have preyed upon young people and their parents for 30+ years, and (3) the option for debt forgiveness or bankruptcy filing might give some young people pause to think that the Establishment isn't really their friend, and the new Administration might not be their enemy.

"(2) debt forgiveness goes a good ways to eviscerating universities and banks"

How? For the government to "forgive" debt, it would first have to be the creditor. That means banks and universities would be paid, and taxpayers would have to eat the loss. Universities will have already collected and spent the money.

The Uni's and Banks are leveraged to hell and back on student loans and need those payments. Cut off the flow of money to them from personal student loans. Fed loans are another matter, but as Brian said -- drop that entirely from the portfolio.

The most important element is to free these students and former students for family formation. They are welded to corporate servitude and limited in ability to build families.

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